and Video Courtesy of News Channel 5
November 18, 2012
WEST PALM BEACH, Fla. - In a market that's rent hot, there’s a new trend.
But at what cost and who’s price?
Raquel Cowe wasn't prepared to learn today's open and available might be tomorrow's closed and bank owned.
|"It’s been a just a nightmare, just a nightmare," she said.
She and her two daughters had just moved into a 2-story Lake Worth rental when,"we would have people lined up taking pictures, going around there taking pictures," she told the Contact 5 Investigators.
Raquel asked the landlord for answers and was left with more questions.
"How can I be served with foreclosure papers if he, supposedly, owns this place?"
When a homeowner walks out on a home, chances are they're skipping out on their HOA dues too.
A Homeowner’s Association can file its own foreclosure to collect those old fees.
If a third party comes in pays those HOA dues off, legally, they can get keys to the home until the bank, ultimately, forecloses.
Renters may never know.
"I used to live here not too long ago," said Raquel to the new renter who just happened to pull up during our interview.
The new renter did not know that the home was in the process of foreclosure.
"They're stepping into the ownership position solely so they can rent the property out collect the rent,” explained real estate attorney, Shari
Olefson. She says the technique of buying out HOA foreclosures is not only legal but lucrative.
"They could easily be looking at a 20-30-40-50% return on investment."
In Jupiter, the Contact 5 Investigators found a home with a market value of $457,000. It was purchased by the company, Boca Stel for about $15,000.
The same company bought a 2700 square foot Boca Raton home for just under $11,000 and a West Palm Beach home for $3,900.
In fact, the Contact 5 Investigators traced 27 properties across Palm Beach County back to Boca Stel. Total market value-- $4.2 million. Total purchase price- $296,200.
"This is really no different than taking advantage of a tax loophole," explained Olefson.
"Is it ethical," asked the Contact 5 Investigators.
"Renting property to someone who thinks they're going to have quiet enjoyment on that property when you know that they won't, when you have reason to believe a bank will come in and kick them out is questionable," Olefson said.
“I don't see it as unethical and I don't see it as unfair,” said HOA attorney, Tamar Shendell.
Shendell represents Palmetto Pines in Boca Raton where Boca Stel paid under $20,000 to get the keys to two homes.
“For my clients, the associations, it's a benefit to the extent they're going to get paid and they'll have people living there that are securing the houses."
Meanwhile, Raquel Cowe believes she was taken advantage of. Four months and $7,000 later she decided to stop paying the rent.
“He’s (landlord) is just ripping people off, that's what I think is happening,” she said.
Raquel was ultimately evicted from the home. A home Boca Stel paid just $6200 to get.
When referring to the investors buying the HOA foreclosures, Shari Olefson describes them as, “I think these folks are making lemonade from lemons. Unfortunately they're really not concerned about sharing the lemonade with anyone else. ”
The owners and associates of Boca Stel did not respond to our request for an interview. Another HOA investor describes the technique as risky for investors since, he said, investors don’t know when the bank will foreclose on a home.
Olefson says renters who are renting a home that was purchased by an HOA investors will not be kicked out of a home in the event the home is taken over by the bank before the lease expires. Olefson says, banks will still honor those leases.
Renters are encouraged to search property records to find out who owns a property and whether or not a certificate of title has recently been purchased on the home. If the title has recently changed, that may be a sign that the home was purchased by an HOA investor. To search the history of a property, log on to your local property appraiser’s website.